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FCC feels the need for Internet speed

NEW YORK (CNNMoney.com) -- The United States has big problems with broadband access, speed and cost, but the Federal Communications Commission's solutions may be too weak to have any lasting impact.

The FCC on Tuesday announced its proposal to bring affordable high-speed Internet access to all Americans. Many of the recommendations are subject to congressional approval and others are long-term goals that the FCC hopes to achieve.

The problems the FCC hopes to solve: America's average download speeds of 4 megabits per second rank 15th in the world, according to the latest study from the Information Technology Industry Council. Although just 5% of Americans don't have access to high-speed Internet, 35% of Americans don't subscribe to a broadband provider due to high costs or lack of interest.

And a goldmine of spectrum that could be used to deliver wireless broadband to millions of potential customers is being held hostage by broadcasters who hold the rights to those airwaves, even though much of the spectrum is unused after they switched to digital signals.

The regulator's solutions: Among the myriad initiatives that the FCC proposed is a government investment of more than $15 billion in infrastructure to bring 100 megabit-per-second speeds to 100 million Americans by the end of the decade. That's fast enough to download an average high-definition movie in about three minutes.

Another part of the plan includes shifting funding from telephone infrastructure to broadband infrastructure to help the country achieve its goal of 90% adoption of high-speed Internet by 2020. And the FCC will ask broadcasters to voluntarily auction off unused spectrum for mobile broadband carriers to free up 500 megahertz of broadband spectrum over the next 10 years.

The FCC said expanding adoption of ultra-fast broadband speeds will have a tremendous economic benefit. The agency, as well as other proponents said it will enable businesses to increase productivity, lower costs by making government and health care data more accessible and efficiently transferred and give low-income Americans equal access to new economic opportunities.

Last decade's broadband innovations helped create companies like Google (GOOG, Fortune 500), Facebook and Twitter. The FCC says small businesses and entrepreneurs also have much to gain from the plan, which would help increase efficiency, improve access to new markets, cut costs and boost the speed of transactions and communication.

A healthy dose of skepticism

But many broadband experts were skeptical of the plan.

"The breakthrough in the plan is that it's an admission that the United States has fallen behind and that we lack a unified plan to address it," said Dan Hays, partner at wireless and tech consultancy PRTM. "But the FCC plan lacks the teeth to effectively implement the full range of recommendations they put forward."

Hays said the FCC's plan is "potentially unachievable" given the complexity of the tasks it outlined. He said freeing up 500 MHz of spectrum nationwide is "completely unrealistic," and it is unclear how the FCC plans to pay for all of its initiatives.

Others said the FCC would have to increase its regulatory authority over broadband providers to achieve its goals, something the cable and wireless companies have already said they'd fight.

"The FCC's going to have a very, very difficult time from an authoritative standpoint dictating anything about a particular speed at a particular price," said Doug Williams, broadband analyst at Forrester Research. "If they tried to assert that authority, they would find themselves in court very quickly. The telcos and cable operators are powerful lobbies and they're not going to let that happen."

Williams said the FCC can't do much more than set goals for the providers, which the government regulator will have to hope they adhere to.

At the same time, some say the existing model was faring well, and the high-speed Internet providers were already largely providing faster and cheaper access on their own.

"A relatively minimal regulatory environment led to 95% of the country to have access and choice in broadband," said Bruce Mehlman, co-chair of the Internet Innovation Alliance. "The FCC's goals are achievable provided there aren't other regulatory actions that dissuade investment."

The speed and cost dilemma

Speeds are generally growing faster, and many broadband providers already offer speeds of 50 megabits per second or more. But at prices that generally cost more than $100 per month, some experts say those speeds are more of a gimmick.

"Ultra-high speed offerings are a marketing game for operators, helping them say they offer the fastest service," said Williams. "The price tag for those services is not conducive to the average consumer, since they don't see the value in paying that much more for that kind of speed."

Still, there has been some action to reduce prices and make ultra-high speed Internet more prevalent. For instance, Verizon Fios' second-tier Internet plan offers speeds of up to 25 megabits per second for $65 per month.

In anticipation of the FCC's plan, Cisco (CSCO, Fortune 500) and Google made announcements in the past few weeks, each touting their ability to provide blazingly fast Internet service. Earlier this month, Google said it would test a 1 gigabit broadband network in a U.S. city, and Cisco unveiled a new router that will be able to download the entire printed collection of the Library of Congress in 1 second.

Some doubt the need for all that speed, but the FCC claims that it is necessary to meet the future demands of businesses and consumers.

In the end, advocates say the FCC plan is a good start, but more needs to be done to address the serious problem of the United States lagging the world in cost and speed.

"The United States needs to step it up and see what's been going on around the world," said James Losey, program associate in the Open Technology Initiative at the New America Foundation. "The challenge is we don't have competition: Most markets are duopolies."